INDIANAPOLIS | The $165 million plan for a new Hammond high school flunked its first financial test Thursday and could be headed for a showdown with property tax-weary voters.

The state School Property Tax Control Board voted 6-3 to reject the construction project. The nonbinding recommendation now goes to the Indiana Department of Local Government Finance Commissioner Cheryl Musgrave, who has six months to make a final decision.

If Musgrave axes the project, which already has been delayed three years by local tax angst, supporters would have to win approval for the new high school via referendum. Opponents want voters to have that say.

"This isn't something that should be left to four or five people," said George Janiec, one of three Team Hammond taxpayer advocacy group members to speak against the project on Thursday.

The legislative property tax overhaul that took effect this month requires referendums for new high school projects exceeding $20 million. But the Hammond plan, which also would convert Gavit High School to a middle school, survived a 2001 voter challenge under the old petition and remonstrance system.

Hammond schools Superintendent Walter Watkins on Thursday told the state panel the district considers it a "moral imperative" to replace the 1917 high school with a modern building. The project would cap a $245 million construction spree -- interest payment notwithstanding -- that began a decade ago.

Principal Linda Fullilove said students with disabilities must enter the current Hammond High School building through a boiler room, take smelly freight elevators to classrooms on the second and third floors and be wheeled through an outside parking lot to enter the gymnasium.

An architect for the project went on to list various deficiencies of the current building, including 610-square-foot classrooms that measures about a third smaller than state recommendations and science labs that lack emergency second exits.

State control board members said they sympathized with the need for a new high school, but they bristled at the price tag: $106.6 million in principal, plus an estimated $60 million to $70 million in interest over 20 years.

And the payments are backloaded. The proposed financing schedule calls for the already debt-heavy district to pay nothing this year and next. Annual payments would jump to $5.3 million in 2010 and balloon to $13.9 million in 2020.